Value of the Risk-Free Rate Assignment | Homework For You
June 2nd, 2020
Suppose that there are many stocks in the security market and that the characteristics of stocks A and B are given as follows:
Stock | Expected Return | Standard Deviation | ||||||
A | 14 | % | 6 | % | ||||
B | 16 | 11 | ||||||
Correlation = –1 | ||||||||
Suppose that it is possible to borrow at the risk-free rate, rf. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfolio from stocks A and B.) (Do not round intermediate calculations. Round your answer to 3 decimal places.)Get Finance homework help today